Final Results
600 Group PLC
22 June 2006
22 June 2006
THE 600 GROUP PLC
PRELIMINARY RESULTS FOR THE PERIOD TO 1 APRIL 2006
HIGHLIGHTS
- Order intake up 15% and strong order book for delivery in second half
2006/7
- Revenue up 6% to £71m
- Underlying profit before tax £0.2m compared with loss of £0.3m last year
- Strategic review now being implemented, resulting in £1.9m restructuring
charge in the year
- Resulting loss before tax £1.7m compared to £0.1m profit before tax last
year
- Net cash inflow from operating activities of £2.1m
- Strong balance sheet maintained incorporating net funds of £5.8m
CHAIRMAN'S STATEMENT
Our continuing focus on organic growth during the year resulted in significant
new product launches, increased sales and marketing activity and improving
supply chain performance. These developments, coupled with improvements in our
markets, generated growth in both order intake and revenue. We continued to
invest the benefits of this growth into the further development of our core
product and market segments.
Market conditions
Our UK and North American markets improved steadily during the year, recovering
from the downturn experienced during the second half of last year. Other
European markets showed more limited growth, whereas those in the Far East
continued to be very buoyant.
Results
The results for this year have been prepared under the new International
Financial Reporting Standards (IFRS) for the first time. Therefore, they include
restated data for the results published for the previous year under UK GAAP.
The Group's underlying order intake increased by 15% with increases in all our
major geographic areas. Our outstanding order book also increased significantly,
but is still below the optimal level for most of our business units. A notable
achievement was the receipt of major contracts worth £5.1m from the aerospace
industry for delivery in the second half of the current year.
Revenue increased by 6% to £71m with the most significant increases coming from
our North American businesses.
Increased expenditure on sales and marketing throughout the Group led to
underlying net operating expenses (before restructuring and disposal of surplus
assets) increasing by £0.9m. Total net operating expenses including
restructuring and disposal of surplus assets increased by £2.8m.
During the year, we commenced the implementation of a strategic review
throughout the Group. This included the extension of our global sourcing
programme and the refocusing of our French operation. The costs of this
restructuring were £1.9m, predominantly non-cash.
Although underlying profit before tax improved from a loss of £0.3m to a profit
of £0.2m, the loss before tax was £1.7m compared with a profit of £0.1m last
year.
Net funds decreased by £0.8m from £6.6m to £5.8m. Net cash inflow from operating
activities was £2.1m, net cash outflow from investing activities was £0.6m and
dividends absorbed £2.3m.
Dividend
As I stated in our last Annual Report and Accounts, with the introduction of the
new accounting standards, dividend payments will now be related directly to our
operating results. The board does not yet consider that the results allow the
payment of a dividend.
People
Andrew Dick joined the board as Group Managing Director from the start of the
year, succeeding Tony Sweeten as Group Chief Executive from 1 January 2006. I am
pleased to confirm that Tony has agreed to stay on the board as a non-executive
director, providing the board with the benefit of his extensive experience of
the international machine tool market.
On behalf of the board, I should like to record our continued appreciation of
the efforts of all our employees during the year.
Outlook
Capacity utilisation levels in western markets continued to show the improving
trend seen last year, indicating continued longer-term growth in demand for
machine tools. However, as I have highlighted in previous statements, short-term
expenditure levels in the machine tool market are determined by the impact of
economic and political events on customer confidence levels and therefore tend
to be very erratic.
We will continue to focus increasingly on organic growth, concentrating our
efforts on the expansion of our core machine tool and laser marking businesses.
With our improved strategic focus and strengthened management teams, I am
confident that we are now in a robust position to maintain the improving
performance trends seen during the second half of last year.
Michael Wright
Chairman
22 June 2006
Enquiries:
The 600 Group PLC
Andrew Dick, Group Chief Executive
John Fussey, Group Finance Director Telephone: 0113 277 6100
Hudson Sandler
Nick Lyon Telephone: 020 7796 4133
GROUP CHIEF EXECUTIVE'S REVIEW OF OPERATIONS
Our key objective is to capture a greater share of the growth opportunities that
exist in the large and growing markets for machine tools and laser marking by
focusing more closely on the needs of customers in our core areas of operation.
The Group's robust finances, strong brands, good design capabilities and product
development skills provide us with a solid platform from which to achieve this
objective.
Market background
The global market for machine tools enjoyed its fourth successive year of
growth, but it was driven principally by the rapid expansion of manufacturing in
China and other low-cost economies, primarily in Asia. The migration of
international procurement programmes to these territories has had a continuing
impact on our industry and on our addressable markets.
Among our major markets, the US demonstrated reasonably solid growth during the
year and the UK continued to recover from the poor second half of last year,
despite the effect of the closure of Rover's Longbridge plant. Demand in Germany
also began to improve during the final quarter for the first time in several
years while the major countries of Eastern Europe remained relatively buoyant.
South Africa continued to make good progress during the year as its communities
benefited from substantial infrastructure investment. Australia and New Zealand
remained flat.
Strategic review
Following my appointment as Group Chief Executive on 1 January 2006, we embarked
on a major strategic review designed to clarify our objectives for the remainder
of this decade. It is clear that we have some very strong brands, that our core
skills lie in the design and development of machine tools and laser markers and
that we have significant scope for improvement in both marketing and customer
service.
Our strategic growth platform in machine tools is based around a central core
activity supplying stand-alone, medium-tech CNC machines under our own
Colchester and Harrison brands. This core is supported by two further
businesses, one focused on conventional machines, centred around the Clausing
brand and the other concentrating on higher-tech, high quality machine tools,
sold together with a total manufacturing solution, centred around our agencies
for Fuji, Toyoda Mitsui, Fanuc and Fidia machines.
Our strategic growth platform in laser marking is focused on fully exploiting
the potential of the new Electrox product portfolio, concentrating our marketing
efforts on key industrial sectors for laser marking and on low to medium
complexity work handling systems.
We have also identified a number of areas where there is significant potential
to reduce our costs. Although the Group has long experience of working with
strategic partners such as Fanuc, we have not been at the forefront of
developing satisfactory sourcing arrangements with low-cost overseas suppliers.
We are already working closely with our existing Chinese partner on lathe
manufacturing and we have also recently opened a representative office in China
to create a more professional framework for the development of additional
sourcing partnerships, notably for our North American operations.
Review of operations
Machine tools
The UK machine tool businesses had a difficult year as a result of the loss of
confidence and overcapacity among suppliers to the UK automotive sector. Also,
supply shortfalls from our Chinese manufacturing partner constrained our ability
to fulfil orders at 600 Lathes, especially during the first half of the year.
Our new product development programme continued with the successful launches of
the new Harrison Alpha XS and XT ranges and the 5-axis T8MSY flagship member of
the Colchester Tornado family.
Improving demand in the final quarter enabled us to end the year on a positive
note with an exceptionally strong order book, including a £4.4m order placed by
Airbus UK with 600 Centre for four Mitsui Seiki machining centres coupled to a
Fastems materials handling system and a £0.7m order from BAe Systems for two
Mitsui Seiki machining centres. Both of these orders are for delivery in the
second half of the current year.
Our USA business also suffered some impact from shortages of imported product
but benefited from the generally robust market and saw an upturn in order levels
towards the end of the year. We expect to achieve margin improvements by
rationalising our USA manufacturing operations and outsourcing the production of
saws, drills and drill presses. Although we made progress in Canada, order
levels did not fully reflect the high levels of market activity and enquiries
that we received. We have recruited a new president for our North American
operations who will be charged with reorganising and re-energising our selling
function and distributor base to ensure that we realise the full potential of
these markets.
Our business in Germany began to see an upturn in its order book during the
second half while our distributors in Central and Eastern Europe continued to
perform well. Increased sales were achieved particularly of Tornado and Alpha
lathes and new distribution channels were opened in the Russian Federation and
Baltic States.
Performance in Australasia was unsatisfactory and action is being taken to
resolve the situation.
Laser marking
During the year we undertook an increased programme of new product development.
This included the completion of the Cobra V series of markers and the
introduction of the Razor CO2 product. Most importantly, we introduced the new
Scorpion fibre lasers that offer significant advantages to our customers in
extended product life, lower maintenance costs and increased flexibility,
reliability and efficiency. This was coupled with the development of a new
MaxBox workstation designed to make the Scorpion range accessible to low volume
first-time users. Customer reaction to these innovative products has been
extremely positive and we achieved particularly strong sales in the UK during
the second half.
The expansion and improvement of our product range places Electrox among the
industry leaders in this sector and in the current year we aim to capitalise on
this strong position through the recruitment of additional sales personnel and
an increase in marketing and selling activity, particularly in the USA.
Machine tool accessories
In the UK, the Pratt Burnerd business, specialising in work-holding systems, was
affected by the general flatness of the domestic market and the disappointing
volume of lathes despatched by 600 Lathes, though there was an encouraging
pick-up in orders in the final quarter. Pratt Burnerd America continued to
develop well, achieving significant growth in sales of the Crawford Collets
range to USA customers.
Gamet Bearings, which produces super high precision taper roller bearings for
machine tools and similar applications, maintained a satisfactory order book
with gains in sales to emerging markets, particularly in the Far East, more than
offsetting reductions in business from the Western economies.
South Africa
Our diversified South African business has had to overcome the loss of its
important agency for Timberjack forestry equipment in April 2005 resulting from
Timberjack's takeover by John Deere. Although the introduction of the new
Terex-Fuchs forestry range proceeded more slowly than planned, valuable new
agencies were secured for Usimeca waste compactors and Altec aerial platforms.
The Fassi truck-mounted crane business continued to enjoy excellent growth. With
a strong portfolio of high quality agencies across a range of sectors, the
business is now well placed to make progress as South Africa continues to invest
substantially in its nationwide infrastructure.
As reported in last year's Annual Report, we sold 25.1% of the business to a
South African individual at the beginning of the year. This not only
strengthened our management team but has also significantly improved our Black
Economic Empowerment rating, enabling us to maximise our business from
government and local authority controlled organisations.
Outlook
The fundamentals for the Group are sound. We have clear objectives and effective
platforms for growth in our two core businesses. Our strengths include good
product ranges, allied with strong design and development skills, recognised and
respected brands and robust finances. As our current global market shares are
small, the markets in which we operate offer substantial opportunities and the
economic prospects in most of our core territories appear reasonably
encouraging. With product development continuing to progress well, our future
growth plans will be built on the development and effective marketing of new
products that meet our customers' requirements and on achieving high levels of
quality, dependability and service.
Andrew J Dick
Group Chief Executive
22 June 2006
AUDITED CONSOLIDATED INCOME STATEMENT
52-week period ended 1 April 2006 52-week period ended 2 April 2005
Before Restructuring Total Before Disposal Total
restructuring (see note 3) disposal of of surplus
surplus fixed
fixed assets assets
£000 £000 £000 £000 £000 £000
Revenue 70,993 - 70,993 67,210 - 67,210
Cost of sales (51,924) (387) (52,311) (48,815) - (48,815)
Gross profit 19,069 (387) 18,682 18,395 - 18,395
Net operating expenses (20,479) (1,489) (21,968) (19,599) 392 (19,207)
Operating loss before financing (1,410) (1,876) (3,286) (1,204) 392 (812)
income and expense
Financial income 10,141 - 10,141 9,575 - 9,575
Financial expense (8,574) - (8,574) (8,702) - (8,702)
Profit/(loss) before tax 157 (1,876) (1,719) (331) 392 61
Income tax charge (429) - (429) (107) - (107)
Loss for the period (272) (1,876) (2,148) (438) 392 (46)
Attributable to:
Equity holders of the parent (320) (1,876) (2,196) (438) 392 (46)
Minority interest 48 - 48 - - -
Loss for the period (272) (1,876) (2,148) (438) 392 (46)
Basic earnings per share (3.9)p (0.1)p
Diluted earnings per share (3.9)p (0.1)p
AUDITED CONSOLIDATED BALANCE SHEET
At 1 April At 2 April
2006 2005
£000 £000
Non-current assets
Property, plant and equipment 14,203 11,916
Intangible assets 2,072 2,960
Investments 84 84
Employee benefits 7,400 -
Deferred tax assets 303 676
24,062 15,636
Current assets
Inventories 21,147 23,213
Trade and other receivables 15,740 15,785
Investments - 580
Cash and cash equivalents 7,657 7,751
44,544 47,329
Total assets 68,606 62,965
Non-current liabilities
Employee benefits (2,281) (6,484)
Deferred tax liabilities (3,003) -
(5,284) (6,484)
Current liabilities
Trade and other payables (14,633) (14,231)
Income tax payable (134) (200)
Provisions (388) (423)
Loans and other borrowings (1,809) (1,714)
(16,964) (16,568)
Total liabilities (22,248) (23,052)
Net assets 46,358 39,913
Shareholders' equity
Called-up share capital 14,212 14,212
Share premium account 13,680 13,680
Revaluation reserve 3,397 -
Capital redemption reserve 2,500 2,500
Translation reserve 843 (17)
Retained earnings 11,333 9,538
Total equity attributable to equity holders of the parent 45,965 39,913
Minority interest 393 -
Total equity 46,358 39,913
AUDITED CONSOLIDATED CASH FLOW STATEMENT
52-week period 52-week period
ended 1 April ended 2 April
2006 2005
£000 £000
Cash flows from operating activities
Loss for the period (2,148) (46)
Adjustments for:
Amortisation of development expenditure 67 -
Depreciation 1,640 1,808
Impairment of goodwill 1,254 -
Net financial income (1,567) (873)
Profit on disposal of plant and equipment (26) (430)
Equity share option expense 31 38
Income tax expense 429 107
Operating cash flow before changes in working capital and provisions (320) 604
Decrease in trade and other receivables 838 604
Decrease/(increase) in inventories 2,903 (2,905)
(Decrease)/increase in trade and other payables (42) 1,614
(Increase)/decrease in employee benefits (1,006) 88
Cash generated from the operations 2,373 5
Interest paid (170) (184)
Income tax (paid)/repaid (66) 44
Net cash flows from operating activities 2,137 (135)
Cash flows from investing activities
Interest received 199 368
Proceeds from sale of plant and equipment 168 506
Purchase of plant and equipment (520) (641)
Development expenditure capitalised (402) (218)
Net cash flows from investing activities (555) 15
Cash flows from financing activities
Proceeds from the issue of ordinary shares - 11
(Repayment)/proceeds from external borrowing (305) 772
Equity dividends paid (2,274) (3,127)
Reduction in current asset investments 580 582
Net cash flows from financing activities (1,999) (1,762)
Net decrease in cash and cash equivalents (417) (1,882)
Cash and cash equivalents at the beginning of the period 7,127 9,010
Effect of exchange rate fluctuations on cash held 8 (1)
Cash and cash equivalents at the end of the period 6,718 7,127
NOTES
1. Basis of preparation
The 600 Group PLC is a public limited company incorporated and domiciled in
England and Wales. The Company's ordinary shares are traded on the London Stock
Exchange.
The Group consolidated financial statements incorporate accounts, prepared to
the Saturday nearest to the Group's accounting reference date of 31 March, of
the Company and its subsidiary undertakings (together referred to as "the
Group"). The results for 2006 are for the 52-week period ended 1 April 2006. The
results for 2005 are for the 52-week period ended 2 April 2005.
The Group financial statements have been prepared and approved by the directors
in accordance with International Financial Reporting Standards as adopted by the
EU (IFRS).
These results represent the first annual financial statements the Group has
prepared in accordance with its accounting policies under IFRS and the
comparatives for 2005 have been restated from UK GAAP to comply with IFRS. For
the purpose of the accounts, the date of transition to IFRS is 3 April 2004.
The rules for first time adoption of IFRS are set out in IFRS 1 "First time
adoption of international financial reporting standards". In general, a company
is required to determine its IFRS accounting policies and apply these
retrospectively to determine its opening balance sheet under IFRS. The standard
allows a number of exceptions to this general principle to assist companies as
they change to reporting under IFRS. The Group has taken advantage of the
following exemptions:
• business combinations that took place prior to the date of transition have
not been restated
• at the date of transition, previous UK GAAP valuations have been used as
deemed cost for properties
• all cumulative actuarial gains and losses on defined benefit schemes have
been recognised in equity at the date of transition
• all cumulative translation differences that existed at the date of
transition are assumed to be zero.
The preparation of financial statements in conformity with IFRS requires
management to make judgements, estimates and assumptions that affect the
application of policies and reported amounts of assets and liabilities, income
and expenses. The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis of making the judgements
about carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and
future periods.
2. Audited consolidated statement of recognised income and expense
52-week 52-week
period ended period ended
1 April 2006 2 April 2005
£000 £000
Foreign exchange translation differences 893 (17)
Net actuarial gains on employee benefit schemes 9,244 7,561
Revaluation of properties 3,397 -
Deferred taxation on above items (3,010) 543
Net income recognised directly in equity 10,524 8,087
Loss for the period (2,148) (46)
Total recognised income and expense for the period 8,376 8,041
Attributable to:
Equity holders of the parent 8,295 8,041
Minority interest 81 -
Total recognised income and expense for the period 8,376 8,041
3. Net operating expenses
2006 2005
£000 £000
Net operating expenses:
Administration expenses before: 14,823 14,159
- profit on disposal of surplus fixed assets - (392)
- reorganisation 235 -
- goodwill impairment 1,254 -
Total net administration expenses 16,312 13,767
Distribution costs 6,154 5,920
Other operating income (498) (480)
Total net operating expenses 21,968 19,207
Total restructuring costs consist of the reorganisation and goodwill impairment
amounts shown above, plus a £387,000 stock provision charged through cost of
sales in the income statement. They relate mainly to the refocusing of the
Group's French operation and the extension of its global sourcing programme as
part of the strategic review.
Profit on sale of fixed assets of £430,000 in the prior period includes £392,000
relating to the sale of surplus plant and machinery. This has been disclosed as
a separate item on the face of the income statement, leaving £38,000 as profit
on sale of other fixed assets.
4. Financial income and expense
2006 2005
£000 £000
Interest income 199 328
Expected return on defined benefit pension scheme assets 9,942 9,247
Financial income 10,141 9,575
Interest expense (170) (184)
Interest on defined benefit pension scheme obligations (8,404) (8,518)
Financial expense (8,574) (8,702)
5. Cash and cash equivalents
2006 2005
£000 £000
Cash at bank 7,406 6,225
Short-term deposits 251 1,526
Cash and cash equivalents per balance sheet 7,657 7,751
Bank overdrafts (939) (624)
Cash and cash equivalents per cash flow statement 6,718 7,127
6. Reconciliation of net cash flow to net funds
2006 2005
£000 £000
Decrease in cash and cash equivalents (417) (1,882)
Reduction in current asset investments (580) (582)
Decrease/(increase) in debt and finance leases 305 (772)
Decrease in net funds from cash flows (692) (3,236)
New finance leases - (53)
Decrease in net funds (692) (3,289)
Net funds at beginning of period 6,617 9,902
Exchange effects on net funds (77) 4
Net funds at end of period 5,848 6,617
7. Statutory accounts
The financial information set out above does not constitute the company's
statutory accounts for the period ended 1 April 2006 or the period ended 2 April
2005 but is derived from those accounts. Statutory accounts for 2005 have been
delivered to the registrar of companies, whereas those for 2006 will be
delivered following the company's Annual General Meeting. The auditors have
reported on the 2005 accounts; their report was unqualified and did not contain
a statement under section 237(2) or (3) of the Companies Act 1985.
8. Annual report and accounts
The annual report will be posted to all shareholders in due course and will be
available on request from the Secretary, The 600 Group PLC, 600 House, Landmark
Court, Revie Road, Leeds LS11 8JT.
This information is provided by RNS
The company news service from the London Stock Exchange